Recently in the Trial - Evidence category:
Fraud based on the “deprivation of honest services” is a controversial charge likely to elicit some notable rulings from the Supreme Court this term, as noted here. In particular, the cases of Jeffrey Skilling and Conrad Black may produce decisions that reign in the reach of honest services fraud in the context of private businesses, two varieties of which have been identified by the Second Circuit in United States v. Rybicki: cases involving bribes or kickbacks, and cases involving self-dealing. Bribery/kickback cases need no introduction. Self-dealing cases, on the other hand, usually involve the defendant causing his employer to do business with a corporation or enterprise in which the defendant has a secret, undisclosed interest. In Rybicki, the Second Circuit adds that "[i]n the self-dealing context, though not in the bribery context, the defendant's behavior must [.] cause, or at least be capable of causing, some detriment – perhaps some economic or pecuniary detriment – to the employer.”
This distinction is at issue in United States v. Demizo, 2009 WL 2163099 (EDNY July 20, 2009), where the defendant was convicted after trial of securities fraud and making false statements. Because EDNY Judge Gleeson concluded, however, that there was no factual predicate to treat the case as a self-dealing one, he declined to defendant’s requested jury charge on the issue of detriment. The case also includes an interesting discussion on the issue of permitting the defendant to introduce at trial a statement the government made in a brief under the "admission of a party opponent” rule.
Refusal to Charge:
Relying on the Second Circuit’s decision in United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003), the court rejected the argument that the jury should have been instructed that the fraud involved self-dealing as opposed to kickbacks, and the government was therefore required to prove a possible detriment to the employers.
Assuming the validity of the legal argument, the court deemed any such instruction inappropriate because the defense “failed to identify any evidence in the record that could permit the jury to find that this was a self-dealing case.” As the Second Circuit has suggested, self-dealing involves a situation where the defendant causes the employer to do business with a corporation or other enterprise in which the defendant has a “secret interest.” That term has not been defined, but the relevant cases all involve defendants who had undisclosed ownership interests in those entities and Demizio “did not argue that the record showed he had such a cognizable interest in the firms to which he steered his employer’s business.”
The court also rejected the defense’s argument that the case involved self-dealing because the government alleged a conflict of interest because, “every fraud case, including the kickback scheme at issue in Rybicki, involve a conflict of interest in that every individual has a personal interest in pocketing a kickback while every employer has an interest in hiring people who eschew such conduct.”
Refusal to Admit a Statement from a Government Brief
The defense also argued that it should have been permitted to introduce into evidence a government pre-trial brief submitted in opposition to a request for a bill of particulars, reasoning that statements made by an attorney concerning a matter within his employment may be admissible against the represented party.
The court explained that while the Second Circuit has previously considered the admissibility of statements made in a bill of particulars and opening statements made by defense counsel at a previous trial and found that, while not inadmissible per se, policy concerns weigh against allowing such statements to be admitted as admissions by a party-opponent. Against that backdrop, Judge Gleeson reasoned that because the brief was a legal memoranda and not a formal pleading, it was merely an assertion about the charges in the indictment – which is a charge of the grand jury – and could not properly be deemed a statement by the government .
Finally, rejecting the claim that the brief was evidence that the government had changed its theory during the trial, the court found the assertion irrelevant “to any factual issue submitted to the jury” and, in any event, the probative value was substantially outweighed by the risk of confusion.
Attorneys: David Spears, Charlita Mays (Spears & Imes LLP) (defendant); AUSA’s Winston Chan, Kelly T. Currie, Winston Paes
Its admission ignored a “common sense precaution which should clearly be taken ... to limit the prosecutor’s presentation to such facts ... as are reasonably necessary to prove the point for which the evidence is admitted, and to exclude unsavory details which go beyond what is necessary to make the point.” David W. Louisell & Christopher B. Mueller, Federal Evidence § 140, at 209 (rev. ed.1985); see also United States v. Bradwell, 388 F.2d 619, 622 (2d Cir.1968) (discussing the undue prejudice that can result when the “minute peg of relevancy [is] entirely obscured by the dirty linen hung upon it” (citation omitted)).
Lawyers (Farmer): Jeremy Epstein, Seth Kean, Grace Lee, Rebecca Boon (Shearman & Sterling LLP) (defendant); AUSAs Ilene Jaroslaw, Peter Norling
Lawyers (Williams): Donald Yanella (defendant); AUSAs Justin Lerer, Jo Ann Navickas
Behind the convictions of criminal defense lawyers Robert Simels and Arienne Irving yesterday on charges of witness tampering and obstruction of justice is a profound question: should there be different rules for the prosecution of lawyers? The Simels prosecutors thought yes, and drafted a unique protocol for the minimization of communications intercepted under a Title III warrant. EDNY Judge Gleeson disagreed. In United States v. Simels, 2009 WL 1924746 (E.D.N.Y. July 2, 2009), he suppressed the fruits of the Title III surveillance because the protocol was internally inconsistent and improperly minimized dissemination rather than the initial interception. In addition to being a detailed primer on Title III minimization issues, especially in the context of privileged communications, the decision joins its companion, discussed here, as another important landmark in the small body of jurisprudence on how (and how not) to prosecute a lawyer for an act of lawyering.
Facts
As part of an investigation into allegations that defense attorneys Robert Simels and Arienne Irving were seeking to influence witnesses in the upcoming trial of their client Shaheed Kahn, the government obtained an order under Title III permitting it to intercept communications between Simels, Irving and Kahn, in the attorneys’ visiting rooms at MCC.
Because the targets included two lawyers, the order contained two minimization provisions, both proposed by the government. The first was a standard provision, requiring the monitoring agents “to minimize the interception of communications not otherwise subject to interception under [Title III], including . . . privileged communications.” The second directed the agents to record (without listening to) all communications between Simels or Irving and their client, and provided for after-the-fact minimization by “Wall Agents” and a “Wall AUSA.”
Two meetings were recorded under the order, and only the second minimization directive was followed (in other words, the meetings were recorded in their entirety and not contemporaneously monitored). Simels and Irving were later indicted on obstruction of justice and witness tampering charges, among others. They moved to suppress the fruits of the wiretap surveillance because of a failure to minimize.
Minimization Cannot Occur After the Horse Has Bolted
Granting the motion and suppressing the communications, Judge Gleeson found that the government’s minimization efforts here were unreasonable, and the post-interception minimization procedure violated Title III. For one thing, the two minimization provisions in the order were internally inconsistent. “By definition, an agent cannot minimize the interception of communications that should not be intercepted by intercepting all communications and sorting them out later.” Moreover, while Title III permits post-interception minimization in two circumstances (where the communications are in code or in a foreign language), neither applied here.
[T]he way to avoid intercepting privileged or nonpertinent communications (as opposed to merely avoiding the unlawful dissemination of communications that should never have been intercepted in the first place) is take reasonable steps not to intercept them. Automatically recording everything, even where that is followed by a post-interception minimization protocol, virtually guaranteed the interception of communications the government should not have seized. The post-interception minimization may have closed the barn door, but the horse was already gone . . . When the government deliberately intercepts nonpertinent communications, it is no comfort to those whose privacy has been invaded that only government actors not involved in a particular criminal investigation will be listening to them.
Privileged Communications Are Not Special
The prosecutors had taken pains to avoid disseminating privileged communications, but Judge Gleeson debunked the idea that privileged communications should not be intercepted in wiretaps. “Communications undoubtedly occur that are both pertinent to the crimes enumerated in an order issued pursuant to 18 U.S.C. § 2518 and privileged under some other body of law, and nothing in Title III prohibits the interception of such communications based on their privileged status.”
Good Faith Not a Defense
Although the court found that the prosecutors’ good faith was “indisputable,” that was not relevant to the outcome. Title III has its own statutory exclusionary rule, and Judge Gleeson found “no indication in the statute that good faith is relevant to the operation of this exclusionary rule.”
Comment
In developing their ill-fated protocol, the Simels prosecutors, to their credit, recognized the serious ramifications of bugging MCC’s attorney interview rooms. But from a defense perspective, if you’re challenging the fruits of such interceptions on minimization grounds, the horse has already bolted. What is far more interesting here is what led to the wiretap authorizations in the first place: several visits to Simels’ law office by a cooperating witness wearing a wire, who proceeded to discuss defense strategy in Khan’s case with Simels and Irving. Judge Gleeson had denied Simels’ concededly “novel” motion to suppress these consensual recordings and their fruits on the grounds that the government’s use of a wired cooperator in these circumstances was unconstitutional. But the motion begs the important question of whether there should be some formal rules requiring judicial supervision before wired cooperators are deployed into a law office. Bad lawyers do not deserve special treatment, but aggressive advocacy does, and that kind of advocacy may be chilled by the kinds of highly intrusive surveillance and investigative techniques employed in this case.
Contributor Robert Culp writes:
Common sense would seem to dictate that a dissent by a district judge sitting by designation is a rare occurrence. Indeed, a rough calculation in the Second Circuit found some 2500 cases decided in the last five years with a district judge sitting by designation with only 14 dissents by those judges. And only three of those dissents were in criminal cases. (Apologies if the research methodology missed some.)
In United States v. Mercado, 2009 WL 2096234 (2d Cir. 2009. (July 17, 2009), Judge Droney, a district judge in the District of Connecticut and formerly the U.S. Attorney in that district, dissented from a panel affirmance on an issue of whether the district court should have admitted “other act” evidence under Rule 404(b) of the Federal Rules of Criminal Procedure and concluded the error was sufficient to warrant a new trial. This is the kind of issue where appellate judges inevitably state the importance of deference to district judges, so the prospect of a district judge sitting by designation disagreeing with two appellate colleagues on such an issue makes for interesting reading indeed.
Majority Opinion
The case is presented unusually in that the dissent is where the background and overall case description is found while the majority opinion is limited to conclusions and analysis. After rejecting an evidentiary sufficiency claim as to which there was no disagreement, the majority opinion turned to the Rule 404(b) issue. Noting applicability of the “abuse of discretion” standard, the majority turns abruptly to its conclusion that the other act evidence was admissible because it went to “knowledge and intent” and furnished background to the charges and prior dealings between the alleged conspirators. Noting that the defense in part was that defendant did not know he was participating in any drug transaction, the Court concluded that “prior gun sales” can “suggest that defendant was not an innocent pawn taken by surprise by the drug transaction.” The Court went on to conclude that the probative value of the evidence outweighed any prejudice, and that the prior gun transactions were “not especially worse or shocking than the transactions charged.” The Court also noted that the district court gave limiting instructions to the jury.
Judge Droney’s Dissent
Judge Droney wrote that while he was mindful of the “considerable deference accorded a trial court’s evidentiary rulings” and the abuse of discretion standard, he felt obligated to dissent. He then turned to what is absent in the majority opinion – the background of the Rule 404(b) proffer in the context of the case. Defendant Townsend was charged with participating in narcotics trafficking by driving principals to various locations for errands, including one where a drug transaction ensued, and by having a gun in the car at one point. The main defense in the case was that defendant in driving others on various errands was merely present and did not knowingly join any drug conspiracy, and in fact he was not paid for his role. (In fact, just such a defense persuaded EDNY Judge Sifton to grant a judgment of acquittal recently in Heras.) The Rule 404(b) evidence was that defendant had previously arranged for sale of a handgun to one of the principals, Jones – who at all relevant times for purposes of the crimes charged and the Rule 404(b) evidence was cooperating with law enforcement.
Judge Droney, detailing and distinguishing Circuit precedent, argued that the Rule 404(b) act of arranging for a gun purchase did not bear any similarity to the charge of driving others to a drug transaction allegedly with intent to join a drug conspiracy. Nor, argued Judge Droney, did it bear on the relationship between Townsend and Jones since it was undisputed that they had been friends since childhood. Judge Droney also concluded that the prejudice outweighed any probative value – that the district court concluded little more than the Rule 404(b) evidence was “no worse” than the crimes charged, and that the proffer was not at all necessary to establish any relationship between Townsend and Jones. It also concerned Judge Droney that the Rule 404(b) evidence itself grew out of the importuning of a government cooperating witness. Judge Droney also concluded that the limiting instructions by the district court were erroneous, describing the evidence as being relevant to an aspect of knowledge that was actually undisputed and mischaracterizing the relevant time period. Judge Droney concluded finally that the error was not harmless, calling the government’s case as to defendant’s knowing participation weak and based essentially on the word of a cooperator Jones whose credibility had been seriously undermined at trial.
Comment
The Rule 404(b) issues in the case alone make it a worthwhile read. A critic might find that the majority’s conclusion that the gun evidence suggested that Townsend was not an “innocent pawn” itself suggests the very character inference that Rule 404(b) is supposed to exclude – that because defendant committed a previous “bad” act involving Jones, he more likely did so as to the charged offense as well – and that the lack of similarity between the Rule 404(b) act and the charged offense disrupts any nexus to knowledge or intent. Nor, arguably, is it so easy to understand why the evidence was necessary to explain a relationship between undisputed lifelong friends, particularly where that relationship was skewed by Jones becoming a cooperating witness at the time of the events in question. But beyond Rule 404(b), the case makes for good theater because a district judge, presumably well aware of the deference accorded to trial evidentiary rulings, disagreed with his appellate colleagues about whether such deference was due here. Whether Judge Droney was more drawing his own conclusion than deferring to the trial court, or whether he was undertaking a pointed explication of why deference was not appropriate is the crux of the debate in this case.
Lawyers: Elizabeth E. Macedonio (Defendant); AUSAs Amanda Kramer and Michael Levy
Facts
The defendant, Frederic Bourke, was charged with violations of the FCPA for allegedly making payments to Azeri officials to encourage the privatization of the State Oil Company of the Azerbaijan Republic and to permit him and others to participate in that privatization. He moved in limine to preclude the government from introducing at trial evidence of corruption in Azerbaijan to prove his knowledge of the bribes at issue. Under the FCPA, knowledge of a circumstance may be established by evidence that “a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.” The evidence the government sought to introduce included “that Azerbaijan was known to be a corrupt nation, that the post-Communist privatization processes in other countries have been tainted by corrupt practices, that SOCAR was a strategic asset of Azerbaijan, and that Kozeny [Bourke’s co-defendant] was notorious as the ‘Pirate of Prague.’”
Conscious Avoidance and the FCPA
Agreeing with the defendant that the government may not introduce background evidence of corruption to show that he “should have known” that Azeri officials were being bribed, Judge Scheindlin held that here, however, the purpose of the evidence was to show that “a person of Bourke’s means, who was considering making a large investment in a venture in Azerbaijan, would have at least been aware of the high probability that bribes were being paid.” As such, it was relevant and admissible.
Defendant and Attorney Proffers
Critically, the court found no prejudice because the government would be able to establish the necessary factual basis for a conscious avoidance instruction. In fact, the government’s factual basis rested on the defendant’s own admissions in proffers to the government. Upon learning that he was the subject of a government investigation, Mr. Bourke appeared for a proffer session with the prosecutor, and admitted that he had been “warned by his counsel that Azerbaijan was the ‘Wild West’ and that doing business in Azerbaijan was like the movie ‘Chinatown,’ where there are ‘no rules.’” For good measure, one of his lawyers had turned over a recording of a conversation between Bourke, another investor and their attorneys in which Bourke revealed his knowledge of the dark side of business in Central Asia, e.g. “Do you think business is done at arm’s length in this part of the world?” (There are some intriguing waiver issues here, but the decision doesn’t explore them, only to note that everyone appeared to agree that the defendant had waiver his attorney-client privilege in his proffer.)
Imputing Others’ Knowledge to Defendant
Finally, the decision addresses another unusual and important issue: the circumstances under which the government may introduce and impute to the defendant evidence of a third party’s knowledge. Here, this knowledge could be imputed to Bourke based on his travels in a private jet with Viktor Kozeny (the alleged mastermind behind the SOCAR investment)and Bourke’s friendliness with Kozeny's “inner circle.” “Based on these [close business] relationships the jury has a fair basis to infer that the knowledge of these individuals can be imputed to Bourke.”
Comment
Much ink will be spilled on the conscious avoidance doctrine in an FCPA prosecution. But a lesson we can all (re)learn from this case is that proffers to the government in criminal cases can have a huge downside and should not be entered into lightly. There may have been compelling strategic reasons for Bourke's proffer in this case, but it always astonishes me how often and easily lawyers will escort the clients in for meetings with the prosecutors, instead of proceeding by attorney proffer or asserting the right to remain silent. As a wily criminal defense lawyer once said to me, “nothing is often the perfect thing to say and an excellent thing to do.”
Lawyers: Harold Haddon and Saskia Jordan, Haddon Morgan Mueller Jordan Mackey & Foreman P.C., John Cline and K.C. Maxwell, Jones Day LLP, Dan Webb, James Reich, Jr. and Christopher Paolella, Winston & Strawn LLP (defendant); AUSA Harry Chernoff
One of the ills highlighted in the Supreme Court's recent money laundering decisions in Santos and Cuellar is the tacking on of money laundering charges to a variety of crimes in order to induce guilty pleas. The entanglement of substantive criminal charges with money laundering charges is illustrated in United States v. Roberts, 2009 WL 1833389 (E.D.N.Y. June 29, 2009), where the defendant, an airline employee, was charged with participation in a drug importation conspiracy and also with two money laundering counts, arising out of his role in surreptitously loading and unloading baggage off and on planes traveling between the U.S. and Jamaica.
Money Laundering
The evidence of Roberts' alleged participation in money laundering consisted essentially of his secret loading of a black plastic bag onto a Jamaica-bound flight which would be retrieved at the other end by another individual who would use it "to pay for the drugs or buy more drugs." Granting the defendant's motion for a judgment of acquittal on the money laundering counts, Judge Irizarry held that this evidence demonstrated "only an intent to conceal the transportation, not an intent to transport money in order to conceal it." As in Cuellar, the evidence suggests that “the secretive aspects of the transportation were employed to facilitate the transportation, ... but not necessarily that secrecy was the purpose of the transportation.” The government had "failed to introduce any evidence that the reason that the drug smugglers move money to Jamaica is to conceal or disguise any of the attributes of the funds listed in Section 1956(a)(2)(B)(i)."
Money Judgment
Roberts fared less well on his request for a jury determination on the criminal forfeiture money judgment sought by the government under 21 U.S.C. § 853 in connection with the narcotics trafficking charges he faced. In United States v. Roberts, 2009 WL 1911690 (E.D.N.Y. June 30, 2009), the court found that on the issue of forfeiture, a jury may decide only whether there is a nexus between the specific property sought to be forfeitured and the charged offense. It had no role where the government only sought - as here - a forfeiture money judgment. "If the government does not seek specific property, but rather a personal money judgment, the court itself determines the amount of money that the defendant will be ordered to pay. . . The defendant is not entitled to have the jury decide the amount of the forfeiture.” Interestingly, the government had not taken a position on this issue, but noted that district courts have differed on the issue.
Continuing a streak of notable decisions in this circuit on the evidence necessary to establish knowledge and intent in conspiracy cases (including Murray Law LLC’s reversal in Lorenzo, and also reversals in Kapelioujnyj and Wexler), EDNY Judge Sifton has granted a motion for a judgment of acquittal to a defendant convicted after trial of participation in a drug conspiracy, and aiding and abetting drug distribution. United States v. Heras, 2009 WL 1874373 (E.D.N.Y. June 29, 2009), makes the important (and not always obvious) point that knowledge is not the same thing as intent, and reminds us of that great principle: “If the evidence viewed in the light most favorable to the prosecution gives equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence, then a reasonable jury must necessarily entertain a reasonable doubt.”
Facts
Nelson Heras had driven Simon Correa, a/k/a Luichi, a known drug dealer, and an acquaintance of Correa’s to a hotel. During the ride, Correa and his companion openly discussed Correa’s plan to pick up drugs at the hotel, something Heras later admitted overhearing. Correa entered the hotel, whereupon he was arrested in a controlled delivery operation. Heras and the companion, who remained in the minivan in the parking lot, were also arrested. Upon being told that “a serious federal crime had been committed involving the importation of narcotics,” Heras stated “Whoa, whoa ... Whatever happened up there, that has to do with Simon. That has nothing to do with me,” and “This is ... Luichi’s deal.”
Holding
Granting Heras’ motion for a judgment of acquittal on both the conspiracy and aiding and abetting convictions, Judge Sifton pointed out that these two specific intent crimes required that “the purpose - not merely the effect - of the defendant’s participation in the crime was to distribute narcotics.” Noting that “the prosecution made little attempt to argue that the evidence established the element of intent, focusing instead on the issue of knowledge,” the Court held that knowledge that Correa was picking up drugs or that he Correa was a drug dealer was not the same as knowledge of any plan on Correa’s part to distribute drugs, much less the equivalent of Heras “knowingly join[ing] and participat[ing] in it or promot[ing] the venture himself.” Moreover, once evidence was introduced of Heras’ “innocent explanation” prefaced with the words “whoa, whoa,” the jury could no longer presume that Heras intended to bring about the ordinary consequences of his actions. “When faced with an innocent explanation sufficiently supported by the evidence to create a reasonable doubt about the defendant’s guilt, the Government’s burden is to present evidence sufficient to dispel that doubt.”
Whoa, now that’s a decision worth noting!
Lawyers: Justine Harris, Federal Defenders of New York, Inc. and Justin Levine, Seijas & Levine (defendant); AUSA Andrew Goldsmith
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